Walmart Corporate Strategy

1. a. Corporate Strategy

Before analyzing Wal-Mart's corporate strategy, it is important to decide what business it is in. For example, if Wal-Mart is in the business of selling consumer goods such as TV's, sheets, clothes, etc then it is pursuing a concentric strategy by entering the food business. However, this changes depending on how you analyze what business Wal-Mart is in. Wal-Mart is in the business of selling everything customers need in their everyday lives. This includes the consumer goods listed above as well as food-service items. Even still, Wal-Mart pursues multiple strategies. Concerning concentration, Wal-Mart continually finds more consumer goods to sell at its stores which can take money from competitors. Additionally, when Wal-Mart entered into the food market, it quickly consolidated and held to good, saleable products. Wal-Mart never forays too far into a market and only sells what will make it a profit.

Recently, Wal-Mart has pursued a conglomerate strategy by starting to sell used cars at some of its stores in Buffalo, New York[1]. Selling cars is an entirely different industry than selling consumer goods. Additionally, it requires a whole new set of expertise that does not come easily. As far as future plans are concerned, Wal-Mart should abandon this strategy and stick to what they do best.

Lastly, an argument can be made that Wal-Mart is also pursuing a vertical integration strategy. Wal-Mart has developed its own name brand to sell products called Sam's Choice. This puts Wal-Mart into the business of making things like soda, cereal, and dog food. While they still don't grow their own crops or raise their own livestock, it is still a form of vertical integration. Also, Wal-Mart works heavily with its suppliers. This symbiotic relationship can be see as vertical integration due to the level at which Wal-Mart analyzes its suppliers and improves their manufacturing processes, etc.

b. Business Strategy

Wal-Mart definitely has the business strategy of Low Cost Leadership. They do nothing to really differentiate themselves from competitors and provide no-frills self-service stores that always provide the lowest prices. Wal-Mart has built enough clout with suppliers that they can dictate the prices and go in and change suppliers manufacturing processes in order to wring out more and more savings for the consumer. Everything that Wal-Mart does from calling suppliers collect to having execs double up in hotel rooms, is to save the customer money. While they do try to provide good customer service on top of low prices, Wal-Mart's strength is low-prices. No one has such a supplier and distribution network like Wal-Mart that allows such low prices.

Porter's 5 forces:

One aspect of Wal-Mart that sets them apart from other corporations is how they manage their relationship with their suppliers. We have determined that Wal-Mart is such a dominant force and has become such an important account for their suppliers that they have managed to eliminate Supplier Power. By eliminating Supplier Power, Wal-Mart can pursue achieving their goals and concentrate purely on their Cost Leadership Strategy, which serves the consumer with "Everyday low prices." However, the fact that Wal-Mart is able to disregard Supplier Power begs the question of where exactly does Wal-Mart derive its power? Additionally, if Wal-Mart has nearly eliminated Supplier Power, then what kind of relationship do they have with their suppliers?

Wal-Mart's power is derived from their size and the influence that comes with it. A quick look at Wal-Mart's numbers is the proof of Wal-Mart's size and power. Some of Wal-Mart's numbers include 23% of Clorox's sales and 20% of Revlon and RJR Tobacco's sales.[2] If these companies choose to walk away from their supplier relationship with Wal-Mart, then they would lose out on nearly a quarter of their revenue. The fact of the matter is that this same concept extends to all of Wal-Mart's other suppliers like Kraft, Proctor & Gamble, Gillette, Campbell's Soup, and many more.[3] The reality that these suppliers live in is one where they know that their Wal-Mart account is one that they cannot afford to lose. In fact, suppliers are also faced to look at the predictions that, in an estimated five years, Wal-Mart will double in size, which mean Wal-Mart's account with only continue to grow.

Since Wal-Mart has effectively eliminated Supplier Power, it is also important to consider the state of their relationship with suppliers. In many ways, Wal-Mart has changed the dynamic of the supplier and buyer relationship. Joe Galli, Newell CEO, was quoted as saying, "The days of price increase are over."[4] Often times, Wal-Mart will tell their suppliers upfront what they will and will not pay for a good.[5] However, despite the fact that Wal-Mart has removed the possibility for supplier price increase, their suppliers generally feel one of two ways about Wal-Mart. The first